Rick Ormsby:
Howdy. Rick Ormsby here and Zane Tankel's alongside me and Zane is going to be talking with us a little bit about the casual dining business and also the Applebee's business and also from New York City, which is all going to be just a tremendous presentation, I think today for you guys. It'll be a real treat. He's almost like a motivational speaker. So I'm giving you high praise here, Zane. So I think everyone's going to really enjoy the story. I'll just wait a couple of minutes for people to start trickling in and maybe we'll start at two or three minutes after the hour, but like I typically try to do, I give my little notes here and talk about a couple of items. Our specialty on ed unbridled, capitalism, and A, right?
Rick Ormsby:
We help people in the sale and financing of their businesses. So just a little 32nd update for those of you who typically sign in. We had gosh, 30 assignments, we're down to 23 current assignments now in the last couple of weeks. We sold 25 Pizza Hut's, 12 Popeye's, 13 Duncan's, 24 Papa John's, seven KFC's. And the pace of new assignments has slowed down a little bit in the marketplace. It was a fury earlier this year, especially in the QSR business as many of you know. Why is that? Restaurant businesses and we're doing really well financially speaking, at least the QSR businesses. We're going to learn a little bit more about casual dining today. And then you had the sellers and operators across really every genre that you can find in our country who are potentially looking to sell their businesses to avoid what could be likely capital gains tax increases many people think after 2021.
Rick Ormsby:
So there's been a big rush to get deals to the market. It's made our industry, not just ours, but other industries for buying and selling things crazy over the last couple of four or five months, but there's been a natural slow down that's happened. And that natural slow down usually happens in the summertime anyway. So pace of new assignments is slowing a little bit, but I think there's a nice equilibrium of buyers and sellers in the marketplace. Lenders are sitting on piles of cash. And I think even for those who are casual diners who are listening in here, I think you're going to see that the lending markets are going to start to open up a little bit. My hope and prayer is that it does for casual dining and fast casual, like it has for QSR over the last four or five months.
Rick Ormsby:
A couple of things. Shout out to you guys who are going to listen to this on podcast. Number one, thank you for listening on podcast in addition to the webinar. All the webinars and podcasts will be on our website at unbridledcapital.com. You can find them all there. All the historical ones over the last several years. I'll email out a copy of the presentation that we're going to do today afterwards to everyone who's attended. And then if you want to ask any questions, please feel free to do it in the boxes below here in the Zoom platform and we'll both eyeball them. I know Zane we'll will keep an eye out too. And as we have questions coming in, we'll try to answer them for you. So with that being said, I guess I'm going to share the screen and then introduce Zane and get this party started if that's okay with you guys. Let's see. Share, can you guys see this? Can you guys see the screen?
Rick Ormsby:
I think you probably can. So I'm going to take off here. There we go. Yeah. So what we're going to be talking about today is the reemergence of casual dining. And I'm here and I'm honored, really honored to be here with Zane Tankel at Apple Metro. He is a franchisee in New York City and most of you have probably been to Times Square area. He's got two locations in Times Square and he's coming live from the 50th Street location, which to my knowledge is the largest Applebee's in the entire world. How cool is that?
Rick Ormsby:
So, Zane is a continent professional and probably you may have seen his face and heard him speak or seen him speak on Fox News. Fox Business, he's a regular contributor. Just an electric personality. And he's going to talk to us about what casual dining was like prior to the pandemic, what happened to casual dining and his brand and New York City all combined into one when the pandemic hit and then what's happened coming out of it. And I think you're going to find this to be a really encouraging message and I'm really excited to have Zane here. So Zane, good afternoon and howdy from New York City.
Zane Tankel:
Thanks, Rick. I was wondering who you were talking about with dynamic personality and all that stuff. And then I realized you're introducing me. Thanks, Rick. Thanks for all the kind words.
Rick Ormsby:
Always, always. It's an honor to have you here. Like I said, and let's jump into it, man because I know they want to hear you, not me. Why don't you fire away and tell us a little bit about your business, what you operate and how it was operating before the pandemic hit.
Zane Tankel:
Sure, sure. I'm glad to and you did say motivational speaker. Where we came from to where we are, I believe anybody can do. It takes basically three things, heart, muscle, and guts. And the story I'm about to tell you required all three to the max. So let's look at March 11th, the day before the city shut down. And the city shut down by a mandate to close all live theaters in New York City, which is a huge tourist attraction, as everyone knows, and is the generator of income for Manhattan as such. And with that income, the Empire State Building and the Brooklyn Bridge and the Statue of Liberty, but theater is the economic driver. Mandate went out to shut all theaters closed, dark, never happened in history. So on March 11th, let's look at the space first. So if I may set the table.
Zane Tankel:
So we're in New York at least and I think it's pretty true throughout the country across all four parts of the restaurant business. That's quick serve, fast casual, casual, and fine dining. We're overbuilt. We're continually being driven by franchise orders and the franchise business to build more. No concern by franchisors as a rule. Not all the time, not all franchise owners about bottom line. They are non top line. So the drive is more units, more units, more units, which is sometimes cannibalizing existing units. And sometimes you make work site selection decisions, and we were all of that times two. Who knows. So, on March 11th, we have 4,000 employees. We're just reaching 40 restaurants here in New York City. We have the 1, 2, 3, and four largest grossing restaurants in the Applebee's system of 2,000 restaurants. We have 42nd Street, just down the block. We have where I sit now at 50th Street.
Zane Tankel:
We have a restaurant in Brooklyn that does about $9.5 million dollars. And we have another one in the Bronx that does about $8 million. So those are the four largest. You think Applebee's as a system does 2.6, 2.7 million and that may be generous. So here we are on March 11th, happy as if we have [inaudible 00:07:48] but we also a month earlier had our $40 million term loan come due. We didn't have 40 million. We were overbuilt. We have a deteriorating guest base. We're continuing to compete for guests. And we have lenders. We had four lenders, as a matter of fact, and that term loan of $40 million came due and we couldn't pay it. So, a lot of people were and will be in that kind of position. What do you do? Where you go? So March 12th, the city closes down with that environment and COVID spreading.
Zane Tankel:
It's spreading at an incredible rate. Our hospitals are filling on a daily basis. Our whole healthcare system in New York is being stressed. Other parts of the country didn't even know what was going on and here in New York we're the epicenter. And why? Because we have these three airports here in New York, and two of them international, Newark Airport and JFK Airport. And they're pouring in from China. They're pouring in from Europe, England, wherever there was COVID and they're bringing COVID with them. And this disease is spreading at an incredible rate. And now people are dying and you drive around New York, if you can picture this, Rick, you could drive around and go past hospitals. You saw these huge refrigerated tractor trailers filled with bodies. The morgues couldn't accommodate any longer. Funeral homes were overbooked and it was chaos.
Rick Ormsby:
Yeah. I mean, when we talked earlier, I remembered not to interrupt you, but I can remember at the start of the pandemic how New York was really the epicenter of it. And no one else really knew much about it. Did we? I mean, I remember it jumped out to Denver and it jumped down to New Orleans pretty quickly. Those are the two other places that I remember it going pretty quickly, but New York was the epicenter of it. And that's where all your stores are, all your employees are, all your customers are.
Zane Tankel:
A hundred percent. And you're a sophisticated guy because you're buying and selling all over the country. And I mean no false flattery. Most people didn't recognize it. Most people didn't know it, but we knew it here in New York. And we even lost early on three people to COVID. One was a kitchen manager for us and been with us 18 years. And now we have people that are not only getting sick, but dying. And we all in New York, we all know someone who was either sick or dying. And it was just chaos. That's March 11th. March 12th, everything shuts. I call a meeting of all of our managerial staff, about 30 people and it was all the office and our area directors and our management team. And I tell them that we're closing the company. This is all within 24 hours. On March 12th, March 13th I call this meeting at our offices in Westchester.
Zane Tankel:
There was no room that could hold 30 people. So we held it in the hallway. And we said, "For now we're shuttered. We're finished with furloughing everyone and that's where we go." Question? And of course, lots of questions. How long, what's going to happen. And the answer to every question I had was, I don't know. I don't know. I don't know because there was zero transparency. I did know that a disease with no guard rails, no vaccine, no ability to control, I was smart enough to know that it travels at its own rate and its own pace. And this was not a two week deal. Shortly after that, we close.
Zane Tankel:
That day we let go of all our management team. We shutter all the restaurants. We do it in an orderly fashion. We didn't run like a bomb scare. We cleaned everything up. We cleaned the kitchens. We made sure all the vents, all the air conditioners, everything, were as tidied up as they could be for an unlimited amount of time. And no one knows what's going to happen, what's going to go on. And I am psychologically prepared and prepare our team that this is it. It was a good run. It's over. It's done. Back up again to March 11th. We're defaulted on a $40 million loan. We have a deteriorating guest base. We've built too many restaurants, too many in the wrong places, too many because of the urging of the franchisor and then just to add insult to injury, we were the victims of a failed strategy, if people will remember, hand cut wood fired grill. So they were changing the whole dynamic of what Applebee's is and was, and it was totally fail. Yeah. So it exactly, [crosstalk 00:12:56] .
Rick Ormsby:
Sorry for the feedback there. You all had minimum wage issues too that you were dealing with in New York City, weren't you-
Zane Tankel:
... which was the other part, right? Minimum wage is now $15. Servers are getting paid $10, which today, even at post pandemic has got to be astronomical to many people on this webinar around the country. $10 minimum wage for a server. So our servers are leaving with 50, 60, $70 an hour, not $10 an hour. And yet still here in New York, the governor has been driving. He's by the way, flash news, for those of you watching, Cuomo resigned a short while ago. [crosstalk 00:13:36] about an hour ago, he resigned, but he was driving to get rid of tip share here in New York, as well as de Blasio is driving get rid of tip share. So wages are going through roof, rents are going through the roof. In New York when you sign a lease, it was SOP. You sign a lease. If you got to [inaudible 00:13:56] well, you did a 2% increase every year.
Zane Tankel:
So 10%, every five years of an increase in your leases. Our leases are 15, 18 years old. So our rents are up 30, 40% from when we did the deals. And that's if you're lucky. Many leases had a 3% a year increase. So that's 15% increases every five years. So we're up 30, 40, 50% on our rents. We're doubled on. Perfect storm for failure. So what can you do to me? COVID, we shut down. We already were not the walking wounded. We were the walking dead. We just didn't know it and ego, and I'm sure many people in a cautionary tale webinar's supposed to be helpful, no matter what part of the food business you're in, don't get caught up in top-line. Worry about your bottom line and don't get caught up in how many units and your ego, I'm going to build it.
Zane Tankel:
It caught up with running a really fertile profitable restaurant, and that's very possible to do. And we're now doing it. We now, and I'll fast forward to the end with 26 restaurants open, do more business than we did with 40 restaurants. And I'll tell you how we got here, but we're focused on the bottom line. Anyway, you come back to March, March 12th, March 13, everything is now closed. About a week later, I made the decision. I called our people back to the office, turned the lights on. The offices are closed. Everything's closed. No one's in the building, zero. And I call a meeting and I say, "They're allowing restaurants to open for to-go business. So maybe we should put our toe in the water and open some restaurants for to-go. We're in five boroughs, Brooklyn, Queens, Bronx, Staten island, Manhattan, and Westchester county. Let's start with six restaurants.
Zane Tankel:
I start with one restaurant in each one of these areas and see what happens. And that's what we did. We started with actually two extra ones. We started with eight restaurants and our to-go business started to really pick back up. We made a really, really critical strategic decision early on, and that is, we weren't going to hire cooks. We weren't going to hire servers. We certainly didn't need any. We weren't allowed to serve indoors. We were shuttered. We were going to hire only our managers and our managers would present it to them. We'll hold their salaries where they are, but they got to go back to being line cooks. Some of them were drivers on delivery. They're going to do the minimum wage jobs for their existing salaries, which didn't make a lot of economic sense, but it made a ton of strategic sense for us because what we came up with early on was if we can keep the management intact and this COVID one day ends, which I thought might literally be years away, we then have the framework of an organization.
Zane Tankel:
We can hire back hourlies and we could fill in. We had the framework of the house. We had to put the skin on the home, the shutters and the brick and the mortar, but we had the frame. And that was the most important strategic decision we made. And all these decisions are being made in a vacuum. They're being made in the dark.
Rick Ormsby:
There's no playbook for something like this, is there? I mean, that's one of the things we just, frankly, this is a Harvard business case study in a way, because when we had to do this, to go from totally shut down 40 restaurants, 4,000 employees, I'm sure well over a hundred million dollars in revenue to nothing, to nothing. I just will point out just something that you guys may not know here, but it's a side story about Zane. He was a MMA fighter and he has climbed to the base camp at Mount Everest, and he's been to every continent. So this is a guy who knows adversity personally and he seeks it out in his life.
Rick Ormsby:
So I asked him in our practice how do you prepare for this situation? What do you do? And I think the crowd is going to be very interested in point number four, which is your strategy for getting through the banks, the landlords and the franchisor. And he immediately went to his background and some of the personal things that he's had in his life in how tough he's been. So, I mean, kudos to you, man. You prepared yourself for probably the biggest unexpected surprise in your life. Huh?
Zane Tankel:
Well, thank you, Rick. One of the things you don't know about me, and I don't say it often, but in terms of preparation, many, many years ago when I was strong and young and bold, I was a member of the Intel community and I trained for these kinds of things. I was up in the hills of Afghanistan and I was in those barren godforsaken regions. So I know fear, and I know that anybody that doesn't have any fear is lying on one hand. On the other end, you can channel your fear into productivity as opposed to flight or fight. You can channel it into... There's a third alternative. Everybody says flight or flight, or be productive or take all that fear and use it for energy. I say, we got through this whole thing to where we are today through heart, soul and guts.
Zane Tankel:
We all, not me, we all had a lot of heart. We were hustling. We were driving trucks, taking product from closed restaurants, where we were in walk-ins and freezers and putting it to the eight open restaurants. So early on for the first month or so we didn't buy anything because we didn't have to buy anything. We were using product that was in the other 30 restaurants and selling it and being truck drivers. So we were very economical in how we opened and what we did. The only thing that wasn't economical, but was smart was hiring our highest paid people to come and do the lowest paid jobs. They came back with a mandate and the mandate was that they had to touch all their staffs, wherever they were, stay in touch with them, touch them, hit them with a text, hit them with an email, hit them with a phone call and tell them to hang on.
Zane Tankel:
It's going to be okay. We're all in this together. Again, you got to go back to the environment in New York, not the country. People are dying left and right. You're getting sick. Hospitals are overrun. People are in stretchers in hallways, in the hospitals. And that's all you saw on the news every night. You saw hallways of all the hospitals in the city with beds and people on ventilators and things up their nose. And you'll also remember there were not enough ventilators early on. So people were dying because they were suffocating. They couldn't breathe. And all this was happening in that environment. What did happen, we were with Uber Eats. We were with third party delivery, although we did have a bunch of technology that helped us in the to-go platform. When to-go opened up we were doing about 50% of our pre COVID sales, but we shrunk all the way down our labor, short of the managers, and we weren't paying any bills, other than food. We didn't pay at those lenders.
Zane Tankel:
Then everything was put on hold by the government. So the lenders couldn't come in and foreclose, which they had no choice. They couldn't anyway, because what would they do with this? So we knew that and our company ran on four tracks. And the four tracks that we ran on was... And this was from sunup to sundown every single day. Every day for literally eight months and 12, 14 hours a day. And here's the tracks, landlords. First thing the landlords did, we closed February 12. We opened February 18, 19. Week later, March 1st, they're looking for rent and they all thought is a week, two weeks. We'll give you two weeks. [inaudible 00:22:28] That's exactly what they [inaudible 00:22:31]. In fact, they [inaudible 00:22:32] the franchise, "Oh Applebee's gave us one week there for a lot of their royalty stream." And I took a very tough, hard position. No, just no. No. [inaudible 00:22:44] No, no deferrals, no rents. No royalties. Have at it. Go for it. But that's our position. We're all about paying our people first and foremost and presents like-
Rick Ormsby:
He's frozen for a minute. So let's see if the same comes back in a little bit. Okay. He's back at us. So you said no. Yeah. You took a hard stance on no royalty-
Zane Tankel:
No rent, no rent and the only bills we were going to pay was for our food and liquor, those two things. We also offered our families the ability to come and eat in our restaurants. We furloughed them but we said to everybody that worked for us, "You can eat in our restaurants." Not every Tuesday, like a lot of people are getting accolades and pats on the back or not every Thursday, every day. You could come and you could eat, you could take home for your family because we're an urban center. We have people live in some really poor neighborhoods in these teeny apartments and they're all closed up and they don't get any money. They were no government funding. PPP hadn't happened yet. You remember that was comped and the new chain, they ran through us and urgent or a rapid kind of a thing where they pushed that money out in record time. But having said that, it still took time. The record time is a long time sometimes. So-
Rick Ormsby:
What did you do with the bank? Tell us your story with your lender because I think that's a really interesting story. And then how you specifically worked out your arrangements with your landlords and the franchisor. I think that would be helpful to people if you're on the-
Zane Tankel:
Sure. So, early on, Applebee's had a conference call with all the franchisees across the country and everybody was talking about their solutions and early on, everybody was ecstatic and delighted to get deferrals. And I got a year deferral and paid out on two years and all that. I took the position that you can't pay deferrals. If landlords are at fixed rent, full rent, I don't know any landlord leaves money on the table, where's the extra money come to pay when you had zero income coming in? Where does that money now come to lay on top of the existing rents.? So we took the unique position that no deferrals. Mitigated rent, we've got to forget about the rent and that's the way it goes. And landlords were very adamant and entrenched. They want to do that, fine. We stayed close. We stayed close because what does a landlord have at the end of the day?
Zane Tankel:
It's two things. It can evict you and a law said that couldn't happen for now and the foreseeable future. And if he did get to evict you, he had somebody to replace you. Well, there's nobody to replace anybody. So where's the leverage from the landlord to force you to pay? And as time went on, landlords began to see that and they began to come around and they began to talk about, "Well, what can we do?" Or, "How can we do it?" The first deal we made, which became our model for all our landlords is, we can't commit to a rent with no commitment as to when the virus ends. And when does business come back? So we will follow the virus. We'll follow like Dr. Fauci said, "Well, follow the science." What's the science? 25% seating, 25% rent, 50% seating, 50% rent and so forth.
Zane Tankel:
I went on air. I was on the Cavuto show and we were shuttered. We were closed. And I remember Neil Cavuto said, "You must be really happy. You can now seat 25% of your restaurants." I said, "Neil, I have a different view of that." "And what's that?" I said, "I view that we lost 75% of our revenue stream." It's not 25% seating. It's 75% loss.
Rick Ormsby:
Loss.
Zane Tankel:
We took that as a very hard position with the landlords. And slowly, slowly, they came around. The largest one in the world was the first one who came. We had three sites with him and he accepted. And when we were only a to-go model, I said we'd pay no rent because we're not a to-go concept. We're a eat in, dining room concept. So if we have to be using your 5,000 square foot facility for something that we need about 400 square feet for, which is a flat top, a grill and a fryer, then so be it. It'll keep us alive so one day we can pay you right.
Zane Tankel:
In the meantime... so that's the one track. Landlords, banks, et cetera and landlords begot other conversations with their lawyers, with their lenders, with... So one landlord might be four different phone calls and their committees. Another track that we were on all the time was, with our staff. I weekly sent out a letter and it was all about EQ, nothing to do with IQ. EQ being emotional quotient. I kept saying to them, "This is going to end, but I can't tell you when. Hang on, fasten your seatbelt." And it was repetitive. Every week it was the same thing. I ran a video every week and we titles it From Me To You, to try and make it personal. Me to You. Not from the Zane Tankel, CEO. It was from Zane to you. And every week I told them that this is a situation anywhere in the world.
Zane Tankel:
You can't go to London. You can't go on vacation in Barbados. You can't run to your home country, be it Central America or the Middle East, because they're worse off than we are. So here it is. Here we are. Buckle up, fasten your seatbelt and hang in there. And I'll keep you abreast every single week to the best of my knowledge and to the best of what I know, which as of this juncture, is zero. Other than this is a long drawn out deal. And that's what we did. We touched them with a video and we touched them with a newsletter and we touched them with the managers. I said, on the following week on air, "You will be judged after the pandemic by how you conducted yourself during the pandemic." So my counsel for anybody that's watching this says, "If there's another crisis, just remember, crises do end ultimately, and it's what did you do during the time of the crisis that people will judge you on after the crisis."
Zane Tankel:
And I knew that. I knew that from my background, knew that from my history, I knew that how I conducted myself on Everest and other mountains around the world. I need to just go to Everest. I was climbing for literally a decade all over the world. So I knew that people looked at what did I do on the mountain, not when I got back down at a cocktail party and say, "Wow, that was really scary. Judge what you went through, why you were really scared.
Rick Ormsby:
Well, yeah, so I'm hearing landlord, I'm hearing tough conversations with the landlords, obviously really creative strategy. You [inaudible 00:30:16] had said no deferrals, you tied your rent to reopening of dining rooms in phases. And then you're communicating with your employees. You keep your key staff online here, your managers, and you have them... And you're doing this at great personal cost, I know. You haven't said it, but I know you did that out of your personal pocket book to keep them paid during the pandemic. Tell us about your lender. There's problems-
Zane Tankel:
... one, Rick. There were four. There were four lenders. So dealing with four different lenders, four different law firms, four different committees at the lenders because that 40 million was pretty well screwed up against the board, different lenders. There was a lead lender, but the lead lender made no decisions any longer after the first two weeks of the not only technical default, the material default. He was helpless because what could he do? Take our company? And what would he do with it? Use it for firewood? And when the wintertime gets here, you'll have a lot of firewood, but what could they do? So they felt frustrated on the landlord side and who felt even more frustrated was their lawyers who are used to making demands and the tenant that the payor the payee... Payor, rather payor dumps and does it. Here, don't sue us.
Zane Tankel:
In the interim, we're also on another track, which is with the government on applying for PPP funding. And we got the first PPP funds with the very strict regulations as to how you disperse it and what you do with it, the FTEs, full-time employees. And we monitored that daily to make sure that when it came time for forgiveness, we would have forgiveness that we used it exactly as dictated. In interim, because we were in this to-go model, and I was personally funding it, we had millions and millions of dollars round figures, about 10 million in a segregated bank account, which our lenders came in because they had transparency into our accounts, part of our loan agreements and scoffed that $10 million from us. So we immediately called them to look at our bank account and it was zero and said, "Hey, you took our PPP funding." And he said, "No, you got that funding a month or so ago. That's money that we're taking that.
Zane Tankel:
Because they thought we were doomed to failure. We're taking that as a partial repayment of your debt. [crosstalk 00:32:50]We can demonstrate, we can prove it, it's PPP money. He said, "Prove it." We had our law firm do a forensic accounting. We sent the four lenders the documentation, and we showed them, but they still didn't like it. And I then threatened to sue because what they did was actually illegal and we're negotiating with them, how they're going to pay us back this $10 million. And when are they going to pay us back and where are they going to do? But [inaudible 00:33:19] it came from four different lenders. So I woke up maybe two weeks later in the middle of the night, staring at the ceiling, screaming, "Why do we want the money back?" They're in the wrong, let's pay down our debt and make a deal and call it a day.
Zane Tankel:
They think we're dead anyway. So whatever they get, we're not going to sue you for. We want that forgiveness. Keep it. You got it. And that started a whole new track and a whole new negotiation, which took about three months. I personally had, along with Roy Rayburn, my partner, some millions of dollars to that funding and we became debt free.
Rick Ormsby:
Wow. So you went from 49. [inaudible 00:34:08].
Zane Tankel:
So that took a tremendous burden off of us that was sitting on our head all the time. If we came out of this COVID, how long will it take before the wolves pounced on us and started eating our flesh? So now we're done with that. And the lenders were very happy because they saw what we were on March 11th, walking dead. Now we're in the middle of the pandemic. We are dead. We just haven't recognized it as such. So whatever they were able to get in payment of the debt, they were going to be happy with.
Rick Ormsby:
They can get 25 cents on the dollar. They happy because you're negotiating in the depths of the crisis-
Zane Tankel:
That's exactly right.
Rick Ormsby:
... and not knowing the outcome. Pretty, pretty gutsy move. And some of the best decisions I've made, Zane are at three o'clock in the morning, staring at the ceiling, too. As an entrepreneur, that's just what you do at times, unfortunately.
Zane Tankel:
Heart, hustle and guts.
Rick Ormsby:
Yeah, hustle and guts. Heart, hustle and guts. Yeah.
Zane Tankel:
Yup, yup. So, in any case, so we get that about eight months into the pandemic. We get that one done, but we're still getting landlords coming at us, coming at it, starting at eight in the morning, phone calls, phone calls from their attorneys, phone calls from other people, all sorts of pressure on us, but we wouldn't move. I wouldn't move. I took all those calls and I told our CFO, I told Roy Ray, I told all my folks. Tell him to call me because what are they calling me? "What do I say?" They called me. And that's what happened. And people would call me and I would deal with it. And here's my counsel, everybody, whether you're, again in quick serve, fast casual, casual dining, be visible. Be there. Don't hide. Don't get under the table. Don't pull the covers over your head.
Zane Tankel:
Just the fact you're visible and they can touch you is somewhat satisfying. It doesn't get them a check and it doesn't get them out of the hole and it doesn't get them out of the woods, but they can communicate with you. And that by itself is meaningful, if there's nothing else. If you run, if you hide and they can't talk to you and your staff, doesn't see you, then you're just left to the destiny of whatever spiraling downhill, like water going down in a bathtub. It swirls and swirls at some point it picks up such a huge swirl that it's no return. There's no journey back to it. So I was visible. I made myself very visible to the lenders, very visible to our staff, very visible to our landlords, very visible to our suppliers, because other than food, we weren't even paying suppliers. But I kept them all in the game.
Zane Tankel:
And I had a great staff in fairness, [inaudible 00:36:52] and have today. They did all the stuff. They did the heavy lifting. They loaded liquor into their cars and took it to an open restaurant from a closed restaurant. They ran in and unloaded from the walk-ins, carried all this stuff out of walk-ins and put it in their cars and unloaded it in the restaurants who were open. They went and visited and took food to staff that couldn't get out of their house because they had infant children and they delivered it. And all hands on deck, all hands on deck, it was an emergency call. And everybody at a certain level of management up that went on to our payroll did their part and more. There were no hours anymore. There was no such thing as hours. They would start at eight in the morning and sometimes we'd finish at midnight and I'd speak to them.
Zane Tankel:
And I know it was midnight. And we're, "Where are you going now?" "Well, I'm delivering? I just got all the food out of X and I'm delivering it to Y and I need to do it tonight because it'll spoil. And I took it out of the walk-in and the walk in was way upstate, where we brought it down from in Westchester and we're delivering it to Brooklyn." And that's what they did. They did the heavy lifting. I did the contact with all the incoming, all the incoming that was happening. I was the buffer port. So they didn't have to worry about that piece. So that's the four tracks. The four tracks were lenders, the landlords, staffing, and the fourth one was people.
Rick Ormsby:
And now, to you use that Rocky analogy, you're punching your way out of the corner now. Right? And here we are and tell us, I mean, you're a wonderful guest because most of you who listen, know I'm a big basketball fan, right? And so I'm a Kentucky basketball fan. And I giggled because when you asked John [Calipari 00:38:48] in an interview, you just say, "Hey, John, what did you think?" And then he'll go... And everyone can listen for as long as he talks and Zane's that way. You can just go and it catches your attention. It's very inspiring. Someone's actually already said that on the call. "It's very inspiring. Can I get a copy of the presentation?" So what happened? Now we've identified what happened prior to the pandemic, then in the middle of the pandemic, what happened on March 12th and thereafter, and then tell us about the turnaround. Tell us how you got out of the corner.
Zane Tankel:
Good. So, there was one more track than I needed. I'm sorry. I just looked at... I did make a couple notes, not many, but a couple. And that was operations. We started opening up restaurants. So I also needed to be involved, even though our ops people, our marketing people and our operations, people were doing again, the heavy lifting. I had to be involved in who we bring back and where are we going to put them them and where are we going to do that? The heavy lifting was done by all the folks around. Nobody gets anything done alone. Nobody. I always tell our people, by the way, and for those of you who are watching, we have no superstars on our team. None. Including moi. What we do have is a bunch of people that play well together in the sandbox.
Zane Tankel:
Nobody is throwing sand in anybody else's eyes. And I don't care what sport, what team, mountain climbing, intelligence work in Afghanistan, whatever it is, you don't play without a team. And if you do play without a team, you ain't playing for very long. So our team was a team in every sense of the word. Everybody had their role. Nobody had to be told, "Will you go do that?" Or, "You go do this." Everybody was doing what they were doing. So the fourth one was operations. Now we're opening restaurants. So we got eight open and we go to 10 open and then we wait on the month and we're going to just see how it goes when we go to 11. And then every couple of weeks, we'd open another one. You both say, "How do you get staff"? Everybody now, this is when all the perks were coming in and the government funds were coming in.
Zane Tankel:
Well, don't forget. We were always talking to them. We told them, "Come eat in our restaurants whenever you want." We told them that "We will keep you abreast of everything." We sent a newsletter out. I would get on air as I am now and we'd send it out to everyone and I'd say, "Well, it's Tuesday again. I wish I had good news for you, but I don't." So in addition to being visible, you have to be honest. You have to be brutally honest. You cannot deceive people or attempt to deceive them because they'll scope it out. And then you've lost your respect and you've lost their credibility. So I would tell them, I tell you every week, as much as I know. And I think because I have this title CEO, I'm supposed to know more. No, I didn't know any more, but I was able to be encouraging.
Zane Tankel:
I was able to be EQ the emotional quotient. I was able to tell them, "If you're holed up in a teeny apartment in Brooklyn, guess what? They're holed up in a teeny apartment in the Bronx and they got them holed up in Manhattan. We're all in this together. And we will fight through this together because all of us are much, much stronger than any one of us. And I promise you ,I'll be at the front of the line. I'll be at the front of the line for any incoming, any issues, any blindsides, I'll take it. And that's how we went through. And we ultimately got more open and then the city turned around and said, "Twenty-five percent seating." Well, we saw a huge boost in our sales. With 25% seating it's somewhat amazing that we had almost the same sales as we did with a 100% seating.
Zane Tankel:
Why? How? I'll tell you how. I'm sitting in a third floor of our 50th Street restaurant right now doing Rick's webinar and it's empty. Nobody's here. At 25% seating, I'd have 25% of all these seats filled because it's a quarter to three in New York City and nobody goes out to a restaurant at quarter to three. And certainly nobody's sitting at the bar, at least they can't afford to sit at the bar if they are sitting at the bar at a quarter to three.
Zane Tankel:
So I'm on the third floor. Our guests are on the first, it's a three-story restaurant, by the way, 15,000 square feet. Each [inaudible 00:43:16] floor is 5,000. So with 25% seating and the pent up demand, people came. We were on weights all day, all day, and people weren't going to work. They were home and they're receiving checks and they have more discretionary income, [crosstalk 00:43:33].
Rick Ormsby:
... two or three in the afternoon they're coming to your restaurant. It's not necessarily lunch or dinner or any set time. You're getting a steady trickle of business throughout the day.
Zane Tankel:
They're getting tired of ordering to go. They're getting tired going through the fast food, be at Burger King, be it McDonald's, and that you were not allowed in the restaurant. You had to stand outside and Burger King would bring your package outside. So you'd see lines outside the door, but you were waiting outside and it got pretty cold in the winter time. And it gets pretty hot in the summertime in New York. So as a result, people weren't even allowed in. They gave their water and then they were told to go stand outside and they'll bring the food out and they'd open the door and they'd hand the food out like you were in quarantine. And people were getting tired of that. So a 25% seating, they were ecstatic to get out because we're basically social people, we're basically social beings. When you're in prison and they want to give you the ultimate punishment, what do they do? Beat you up? No, it's not allowed. Shock treatment? No, that's not... They put you in solitary confinement. That's the ultimate penalty when you're already in the ultimate penalty of prison.
Zane Tankel:
So we were by self determination in lockdown and in prison and worse, solitary confinement in prison. And if you had little infant children in a teeny apartment, that was worse than being in solitary confinement by your own. So at 25% seating, there was a rush. And then we got to outdoor seating. In New York City, for those of you who do or don't know, put a mandate that take city streets. Put tables outside, however you can do it. You put tables. Many places doubled the size of the indoor restaurant by putting all these tables outside, but they failed. And why did they fail? Because it's not so simplistic, Rick, to just set tables and I said this to our team. But tables outside with servers and deliver food, need a table number. You have a POS system. How do you identify? You had to rejigger your POS system to say a whole new 20 tables got new numbers. And how do you identify where the food goes? So we had to rejigger all our technology.
Zane Tankel:
We were also at the same time shrinking the menu, which didn't take genius, because I think most everybody did do that. They made it a lot more profitable. You didn't need the prep people, you didn't the number of SKUs. You didn't need all the other things that go with a kitchen when you have 60 items on the menu and you reduce it to 35. And that reduced labor dramatically. And last but not least, our technology drive, where we put together tablets, even ahead of Applebee's, we have tablets, which we gave to the servers so they took your order at the table and it went right into the kitchen and went to the next table. So we, instead of being a server for three tables or four tables, we have 25% seating, we gave 10 tables to a server. They took an order. They took an order. They took an order. And then we hired two new categories.
Zane Tankel:
We hired what we called sanitation experts. And we put a big sign across and we made t-shirts and we put a big sign across their chest and back that said Sanitation Expert. And they cleaned the tables and it took... We timed it. Eight minutes to clean a table. Three different kinds of disinfectants, three different kinds of detergents and they would scrub the table down and it took a long time, but people were great... Oh, they were gracious. They were glad to wait because they're scared to death of COVID-19.
Zane Tankel:
So we dealt with that. And as servers, we're going table to table to table. We had Ras, restaurant associates and the restaurant associates... We didn't want to call them food runners. That's too demeaning. They were too important to us. We call them restaurant... RAs, restaurant associates. So the RAs are shooting the food out. The servers are in front, just taking orders. And then they would help shoot food out if they didn't have people seated. And the sanitation experts are cleaning these tables down. Well that permeated the neighborhood. Social media said, "Oh, you got to go to Applebee's. They got service staff, they got sanitation experts. You ought to see them clean the tables down. And it takes them 10 minutes to clean a table." And not only the table, Rick, underneath the table, the chairs, the backs of the chairs, and of course throw away menus, which we're still at and napkins and wrap silverware. All the things that go with it. And I-
Rick Ormsby:
Also had a pretty big... Sorry to interrupt you. You also had a pretty big increase. I want to go back to this idea. Pre-pandemic you had 40 locations. And post-pandemic you have 26 locations and you're doing more in revenue in 26 locations than you were doing in 40 locations.
Zane Tankel:
Correct.
Rick Ormsby:
And I know one of them is how you had this big return to people coming to your locations because of the way you've operated them. And because the day part has changed, but also you've had a really tremendous kick up in delivery and carry out ordering too. Right? Could you talk a little bit about that? We've got about 10 minutes more so we want to [crosstalk 00:49:06] time.
Zane Tankel:
You just cut me off because this story fascinates me. This is only the second time I've told it. And the first time was to you. [crosstalk 00:49:18] I doubt that. So and it fascinates me when I try and look at it in the macro as to how we got here. So delivery was 8 to 10% of our sales on March 11th. And the day before we shut down. 8 to 10%. When we were permitted to reopen as a to-go model several weeks later, our sales were of course, 100% of to-go, 50% of total sales, but 100% was just to-go. And then it started to inch back up, inch back up, inch back up so by the time we got to 25% seating, we were 80% still on to-go. And the 10% we were doing pre-COVID gave us the experience of how to deal.
Zane Tankel:
We only had to scale up. We knew how to put food in the bags, we knew how to check that the condiments were in the bags. We'd been doing it with 10% of our sales. By the way, pre-COVID we were around, round figures, $150 million. So 15 million of it was to-go business. That's enough to get you to learn the to go business. Now it jumped to 70 million, but all we had to do was scale it up. Everything that we were doing was correct. The critical thing on to-go, was get the food in there hot so you didn't have the luxury of taking your time. We had the cook more fries every time. They couldn't be held because they get hell when the delivery guy brings it. So we had to learn to make food hot, which you're supposed to do anyway in normal times.
Zane Tankel:
But obviously you become complacent. Obviously, you begin to... Now it was different. Everybody's attuned. They're aware, they're scared. There's a different world. A different vibe, a different environment. And now COVID in New York is starting to come under control and hospitals are starting and people are starting to be able to get their arms around this disease. We're still having a huge death. We're still the epicenter, but we're [inaudible 00:51:19] we're deteriorating in numbers, and we're getting better and better at what's going on in our health system, which gave people confidence to come out and get out from underneath the bed and start to look around and see what's going on. And what they found was... And this isn't a not do a quick serve because quick serve are the ones that really got it right pre-COVID.
Zane Tankel:
They started doing salads. They started doing better menus. They started doing everything that they needed to do to get off of the bad food and to the good food and service the population. So they were the ones that really got it right first. And now we had to get it right to begin to deal like they were already doing in the quick serve business. But here's what the guests began to feel. Not quick serve. Enough to-go. Enough. I'm a social being. I haven't talked to anybody but my children in nine months and other than on the internet, other than texting, social media. So when it came time to go out and look at the sun and lift your head up, it was very invigorating. It was empowering. And we drove on that. We drove when we urged each restaurant we opened, we said, you got to remember, you have a huge obligation. This isn't a restaurant job. This is no longer a restaurant job.
Zane Tankel:
You now have an obligation to the community and to your guests to make them feel comfortable, to make them feel we're taking it off of the transaction. A transaction is what? Take an order, bring the food and bring me a check. That's a transaction.
Zane Tankel:
And we're going to eliminate that or rather, put it on the tail end and we're going to go into a hospitality business. What's hospitality? When somebody comes in, [inaudible 00:53:10] "Hey, how are you? Are you still around? Good to see you. It is so great to be out and smelling fresh air." And that's hospitality. Transaction is when we bring them the check. And then we mix it with hospitality by saying, "Thank you very much. I hope you enjoyed yourself". And we're going back to the future. And that's what [crosstalk 00:53:32] that's what casual dining was about pre-COVID, supposedly. But we lost that. And-
Rick Ormsby:
Listen to that point, anyone who's here and interested in investing in the casual dining space. Listen to what Zane said there, that the casual dining had lost its way in the way it was providing hospitality to the customer. And so what was happening is, as there was this crazy corporate push to build more stores in more locations across all of these brands, you saw the casual dining sector continue to shrink and people stealing sales and transactions away from casual diners. But as we come back, COVID, isn't it crazy people yearn for social interaction. And if you have a brand that can provide great customer service and great hospitality to them and a great food product, you've got a new chance to bring them back and to bring them back to the past when it was a place like it was for me. Applebee's, back in the nineties and eighties, when we would go every week after church, the whole family would go together. And you can liken it back to when the server knew your name when you sat down at the restaurant.
Rick Ormsby:
And those were the things that you don't forget from your youth. It's really, really great to hear. And we've got about five minutes more, Zane. I mean, what a great story. I mean, you can just go with it, whatever you'd like to say. I think in the last five minutes or so, because I know how much you think about the future, and I know how respected you are in the community about your opinions, about what will happen. I know you've got two new stores you're building, which is what the heck are you doing building two new stores? What do you think about this? What's going to happen with casual dining?What's going to happen here? You've been given a tremendous story and a tremendous turnaround. And is that... I mean, you particularly, but also for the industry, how's casual dining going to keep this comeback going? It sounds like it's going great.
Zane Tankel:
Well, we've also been given a huge new lease on life, and that's most importantly. We've been given a huge new lease on life. And so we forgot about hospitality because we were all caught up in top line number of units, stores, and we were eating our own flesh. So what's the lesson learned? That's pretty stupid. That's pretty dumb to get caught up with people driving you to build more units so they can make more money. No, no. We don't do that anymore. We focus on each unit. We focus on the hospitality part of the transactional business that we're in. We're going to continue to capitalize the wind at our backs, filling these sales and driving it because what happened during COVID, the big lesson to me that was learned is, the social interaction and the importance of it. That's the big gap in our competitive spaces of fast, casual and quick serve, is the social interaction that we were born and meant to have.
Zane Tankel:
And we provide it. Does it mean there's no quick serve business? No. There's still very much a need for quick serve and fast casual? Fast casual, that's... Stop and think, Rick,. What is that fast casual? It's us with better service, fast casual. So we're going to make casual dining faster and that was another lesson that we learned that we had to get our food out faster. We had to [inaudible 00:57:06] We don't own anything. We don't own any space. We don't own any guests. We have to deliver and if we deliver, they choose us as their provider. If we don't deliver, there's a hard choice out there. There's a lot of options out there and we're not going to let it happen a second time. We were given the benefit to take these lessons learned.
Zane Tankel:
We now, by the way, I should tell you, have all deals done with our landlords. All the landlords and all our bills are paid. All our bills are current. Everybody's paid in full and we're really happy. And our vendors are really happy. And even our landlords, while they didn't get the full whatever they want, they are happy because they still have lots of people not paying them. Well, they made a deal with us and we're paying them. There was one landlord. We wire transferred $550,000 of catch-up rent, but it was at 25%. It was a year at 25% of the rent. So when we made the deals, we told every landlord, we had our PPP funding. We'll send you a check. We're not going to pay it off. We're not going to pay. You'll get a whole check and we'll pay currently, whatever percentage we agreed upon.
Zane Tankel:
So now in New York, we're at 100% seating. We pay all the landlords 100% rent. We have no deferred rent. Zero. I know I'm on a podcast. Zero deferred. Every rent we had was mitigated, but it wasn't put off to be paid down the road on top of existing rent. So we held firm. And those of you who haven't paid, I suggest you do the same thing because the landlord, when he would tell me, and I say this for your argument with them, "Well, we have to pay our mortgage," I say to him, "When you pay your mortgage, you're getting equity. When we pay you rent, we get air." And last time I looked, air was for free. So we're not going to pay for it. We're not paying for breathing. If you have to pay your own mortgage, I'm sorry.
Zane Tankel:
You bought the building and now you got to pay for it. So be it. We'll pay you. We'll have contribute to that. We'll pay for it, but here's what we'll pay. We're not going to pay what we signed on for. We rent. When anybody rents space, you rent it for the privilege of using somebody else's facility to do your business and hopefully have enough money left over to pay him and have something left over for yourself. If you can't use his facility because there're some crises like COVID, then why would I pay him rent to not have his facility to generate income? There was no rationale for it, not in the wildest dreams. And we went to court on a couple of them and a judge thought that was a pretty good argument as well.
Rick Ormsby:
What a tremendous story. I think, I leave this hour and I hope you guys do too with just some really nice takeaways and a really good feel, good story. I mean, Zane probably doesn't tell you all of the three o'clock in the morning things that were in his head, right during this, using the fears and all the things that happen when the COVID pandemic hit. But my goodness gracious, what a great turnaround story. Debt-free, 26 locations, doing more in sales and profits than they were prior to the pandemic. Building... We didn't touch on this much, but two new locations that are going to be coming on board.
Zane Tankel:
New build, brand new builds.
Rick Ormsby:
New built, brand new builds, a business that is strong and profitable, loyal customers and a new lease on life, right?
Rick Ormsby:
Like you said, and a better understanding of hospitality and a better understanding of the interaction, the social interaction that people need, and they associate with food. And so as an advisor and as someone who also runs around with money, as it relates to restaurants, I would say that the next stage of this comeback could possibly be a casual dining comeback after we get past the big QSR increases. The casual diners are seen many of them, maybe not quite as extreme as you're seeing here with Zane, but they're doing better in many cases doing really well. Now labor is another issue, right? We have labor problems that we all have to deal with right now in today's society. But this is a tremendous segment that I personally feel like we're going to see some really good results.
Rick Ormsby:
And if they can kind of continue to hold on to these learnings from the COVID timeframe and increase their service and increase the speed of the food, increase the quality of the food, increase the hospitality, I think you'll see the segment really explode into 2022. So I really thank you, Zane.
Zane Tankel:
Thank you, Rick. I appreciate it.
Rick Ormsby:
Your story is amazing and we're honored to be here with you and thank you guys so much. Well, if you saw my contact information, if you have any questions for Zane, please feel free to email them to me. I'm sure he'd be willing to answer questions. And if you're in New York City and let's hope get to New York City again soon, man, you got to go eat at an Applebee's in New York City. So please do and experience some of the dynamite food that I know Zane serves. And thank you so much.
Zane Tankel:
Thanks, Rick. Thanks so much. Yeah. You know what? I learned a lot through this, and most importantly, I learned about life and that we are what we are and we're social beings. That's who we are and the renaissance of casual dining is here and it's for us to lose.
Rick Ormsby:
That's awesome. That's awesome. Thank you so much. Awesome. Awesome job. Take care, Zane.
Zane Tankel:
Thank you.